Opinions of the United
2001 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


8-22-2001

Smith v. Natl Collegiate
Precedential or Non-Precedential:

Docket 97-3346




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"Smith v. Natl Collegiate" (2001). 2001 Decisions. Paper 189.
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Filed August 22, 2001

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

Nos. 97-3346 and 97-3347

R. M. SMITH
    Appellant

v.

NATIONAL COLLEGIATE ATHLETIC ASSOCIATION

ON APPEAL FROM THE
UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
AND ON REMAND FROM THE
SUPREME COURT OF THE UNITED STATES

(D.C. No. 96-cv-01604)
District Judge: The Honorable Donetta W. Ambrose

On Remand from the United States Supreme Court
Submitted pursuant to L.A.R. 34.1(a) on May 18, 2001

BEFORE: NYGAARD, MCKEE, and GREENBERG,
Circuit Judges.

(Filed August 22, 2001)

       Virginia A. Seitz, Esq.
       Sidley & Austin
       1722 Eye Street, N.W., Suite 300
       Washington, DC 20006

        Attorney for Appellant
       Carole S. Katz, Esq.
       Reed Smith
       435 Sixth Avenue
       Pittsburgh, PA 15219

       John J. Kitchin, Esq.
       Robert W. McKinley, Esq.
       Swanson Midgley
       2420 Pershing Road, Suite 400
       Kansas City, MO 64108

       Christine A. Ward, Esq.
       Sweeney, Metz, Fox, McGrann &
        Schermer
       11 Stanwix Street
       Pittsburgh, PA 15222

        Attorneys for Appellee

       Neena K. Chaudhry, Esq.
       National Women's Law Center
       11 DuPont Circle, N.W., Suite 800
       Washington, DC 20036

        Attorney for Amicus-Appellant

OPINION OF THE COURT

NYGAARD, Circuit Judge.

Once again, we review Renee M. Smith's appeal from the
District Court's dismissal for failure to state a claim and its
denial of her motion to amend her complaint. Smith alleges
that the National College Athletic Association's bylaw,
which prohibited her from participating in athletics while
enrolled in a graduate program outside her undergraduate
institution, violated Title IX of the Education Amendments
of 1972. The primary issue we must decide is whether the
NCAA can be considered a recipient of federal funds,
thereby subjecting it to Title IX. Smith initially attempted to
amend her complaint to argue that the NCAA is subject to
Title IX because it receives dues from its members
universities, which are recipients of federal funds. We
accepted this theory in Smith v. NCAA, 

, 189

                                 2
(3d Cir. 1998). The United States Supreme Court, however,
reversed, but left Smith's two alternative theories for
bringing the NCAA under the prescriptions of Title IX
unresolved. See NCAA v. Smith, 

, 468-470,

, 929-30 (1999). Those two theories are now
before us in this appeal.

I. BACKGROUND

The NCAA is an unincorporated association comprised of
public and private colleges and universities. It is
responsible for promulgating rules governing all aspects of
intercollegiate athletics, including recruiting, eligibility of
student-athletes, and academic standards. By joining the
NCAA, members agree to abide by and enforce these rules.
Among them is the Postbaccalaureate Bylaw, which allows
a postgraduate student-athlete to participate in
intercollegiate athletics only at the institution that awarded
her an undergraduate degree.

Smith was an undergraduate at St. Bonaventure
University, an NCAA member, where she played
intercollegiate volleyball in 1991-92 and 1992-93. She
chose not to play volleyball during the 1993-94 season.
Smith graduated from St. Bonaventure in two and one half
years. Thereafter, she enrolled in a post-graduate program
at Hofstra University that was not offered at St.
Bonaventure. During the 1995-96 academic year, she
enrolled in a different post-graduate program at the
University of Pittsburgh. Like Hofstra, St. Bonaventure did
not offer this program. In both years, Smith sought to play
intercollegiate volleyball, but the NCAA denied her eligibility
under its Postbaccalaureate Bylaw. The NCAA also declined
Hofstra's and the University of Pittsburgh's requests for a
waiver of the Bylaw.

In August 1996, Smith filed her initial complaint in this
case. She alleged, inter alia, that the NCAA's refusal to
grant a waiver excluded her from participation in
intercollegiate athletics on the basis of her sex in violation
of Title IX.1 The NCAA moved to dismiss the complaint on
_________________________________________________________________

1. Smith also alleged violations of the Sherman Act and state contract
law. The District Court dismissed the Sherman Act claim and declined

                               3
the ground that it failed to allege that the NCAA is a
recipient of federal financial assistance, and the District
Court agreed. See Smith v. NCAA, 

, 219-
20 (W.D. Pa. 1997). Smith then filed a motion for leave to
amend her complaint to allege that the NCAA "receives
federal financial assistance through another recipient and
operates an educational program, or activity which receives
or benefits from such assistance." The District Court denied
the motion, holding that it was moot.

We reversed. Although Smith's original complaint failed
to state a Title IX claim, we held that her allegation that the
NCAA receives dues from federally-funded member
institutions was sufficient to bring the NCAA "within the
scope of Title IX as a recipient of federal funds and would
survive a motion to dismiss." 

. The
Supreme Court disagreed. It held that the mere fact that an
entity receives dues from a federally-funded program is not,
by itself, sufficient to render it a recipient of federal funds.
See 

, 119 S.Ct. at 929. The Court
explained that "[a]t most, the Association's receipt of dues
demonstrates that it indirectly benefits from federal
assistance afforded its members." 

Supreme
Court vacated our decision. It noted, however, that Smith
pressed two alternative theories for bringing the NCAA
under the purview of Title IX. Specifically, she argued that
when a recipient cedes "controlling authority" over a
federally funded program, the controlling entity is covered
by Title IX. See 

119 S.Ct. at 930. She also
argued that the NCAA directly and indirectly receives
federal financial assistance through the National Youth
Sports Program ("NYSP")2 and the National Youth Sports
_________________________________________________________________

to retain supplemental jurisdiction over the state claims. See Smith v.
NCAA, 

, 218, 220 (W.D. Pa. 1997). We affirmed the
dismissal of the Sherman Act claim, 

, and the
Supreme Court denied certiorari. See 

n.2.

2. The NYSP is a youth enrichment program that provides summer
education and sports instruction on NCAA member and non-member
institution campuses. The NYSP receives federal financial assistance
from the Department of Health and Human Services. See Cureton v.
NCAA, 

, 110 (3d Cir. 1999).

                               4
Program Fund ("Fund"), which are administered by the
NCAA. See 

did not address these theories but
instead left them "to the courts below on remand." 

are now before us for consideration.

II. DISCUSSION

A. Controlling Authority Theory

Smith first argues that the NCAA is subject to Title IX
because it has "controlling authority" over the
intercollegiate athletic programs of its member institutions
that receive federal financial assistance.3 She seeks to
amend her complaint to include this theory.

We have previously addressed whether the NCAA has
"controlling authority" over its federally-funded members in
the context of Title VI. In Cureton v. NCAA, 

(3d Cir. 1999), African-American student athletes alleged
that the NCAA's scholastic aptitude test requirements
concerning freshman year intercollegiate competition
disparately impacted them and thus violated Title VI.4 The
NCAA moved to dismiss the complaint arguing, inter alia,
that the NCAA does not receive federal funds. See 

_________________________________________________________________

3. Section 901(a) of Title IX of the Education Amendments of 1972, 20
U.S.C. S 1681(a), provides that "[n]o person in the United States shall,
on
the basis of sex, be excluded from participation in, be denied the
benefits
of, or be subjected to discrimination under any education program or
activity receiving Federal financial assistance." Under the Civil Rights
Restoration Act of 1987, 102 Stat. 28, 20 U.S.C.S 1687(2)(A), a "program
or activity" includes "all of the operations of . . . a college,
university, or
other postsecondary institution, or a public system of higher education
. . . any part of which is extended Federal financial assistance."
Intercollegiate athletics is an educational program or activity within the
statute. See 20 U.S.C. S 1687; 34 C.F.R. S 106.41. Thus, the NCAA is
subject to Title IX provided that it receives federal financial assistance
within the meaning of 1681(a).

4. Title VI precludes exclusion from participation in, denial of the
benefits of, and discrimination under any program or activity receiving
federal financial assistance on account of race, color, or national
origin.
See 42 U.S.C. S 2000d et seq.

                                  5
The District Court held that the prohibition's disparate
impact on African-Americans violated Title VI and its
corresponding regulations. The court adopted two distinct
theories to support its finding. First, the court determined
that the NCAA was an "indirect recipient of federal financial
assistance" because it exercised effective control over a
block grant given by the United States Department of
Health and Human Services to the NYSP. Second, the court
held that Title VI covered the NCAA because member
schools had vested the NCAA with controlling authority
over their federally-funded athletic programs. See 

(citing Cureton v. NCAA, 

, 694
(E.D. Pa. 1999)).

We reversed the District Court with respect to both
theories. First, we assumed without deciding that the
NCAA's relationship with the NYSP and the Fund rendered
it an indirect recipient of federal financial assistance.
However, we concluded that the regulations implementing
Title VI are program specific--that is, they only forbid
disparate impact discrimination in programs that actually
receive federal financial assistance. Therefore, we held that,
to the extent the plaintiffs' claims were predicated upon the
NCAA's receipt of federal financial assistance through the
Fund, they were insufficient, because the Postbaccalaureate
Bylaw was unrelated to the Fund's programs. See 

Next, we rejected the plaintiffs' "controlling authority"
theory. In so doing, we relied upon the Supreme Court's
decision in NCAA v. Tarkanian, 

, 

(1988). In Tarkanian, the NCAA recommended that the
University of Nevada at Las Vegas ("UNLV") suspend its
men's basketball coach following the NCAA's investigation
into numerous allegations of rules violations. UNLV
disagreed with the NCAA's recommendation, but ultimately
adopted it. The coach then brought an action under 42
U.S.C. S 1983, claiming that the NCAA was a state actor,
because UNLV delegated its functions to the NCAA and
ceded its authority both to adopt and enforce rules
governing UNLV's athletic programs. The Court held that
the NCAA was not a state actor. Although it recognized that
the NCAA's rules and recommendations clearly influenced

                               6
UNLV, it concluded that the University, not the NCAA,
made disciplinary decisions concerning its employees. The
Court explained that UNLV had choices. It could have
retained Coach Tarkanian in spite of NCAA
recommendations and risked sanctions, or it could have
voluntarily withdrawn from the NCAA. The Court stated
that although "UNLV's options were unpalatable does not
mean that they were nonexistent." 

n.19.

Based on the above, we concluded that Tarkanian "makes
clear that the NCAA does not `control' its members."

. We reasoned that, similar to the
personnel and employee decisions at issue in Tarkanian,
the ultimate decision as to which freshman will participate
in varsity intercollegiate athletics belongs to the member
schools. We stated: "The fact that the institutions make
these decisions cognizant of NCAA sanctions does not mean
the NCAA controls them, because they have the option,
albeit unpalatable, of risking sanctions or voluntarily
withdrawing from the NCAA." 

We also noted that
the NCAA's constitution expressly provides for the retention
of institutional control over individual athletic programs.
See 

As such, we concluded that:

       [W]e cannot understand how the fact that the NCAA
       promulgates rules and regulations with respect to
       intercollegiate athletics somehow means that the NCAA
       has controlling authority over its members' programs
       or activities receiving Federal financial assistance. After
       all, the institutions decide what applicants to admit,
       what employees to hire, and what facilities to acquire.

Accordingly, we held that the NCAA is not
subject to the prohibitions of Title VI because its member
institutions do not cede control of their athletic programs to
the NCAA.

Finally, we recognized that applying disparate impact
regulations to the NCAA would be inconsistent with the
contractual character of Title VI. See 

Specifically,
we noted that there is no contractual privity between the
Department of Health and Human Services, the Department
of Education, and the NCAA with respect to the federal

                               7
financial assistance to colleges and universities. The NCAA
is not in a position to accept or reject the federal funds paid
to these institutions. We acknowledged, however, that the
absence of contractual privity is not an absolute bar to
possessing controlling authority. If an entity truly assumes
control of a federally-funded program, then it is in a
position to accept or reject that control as part of its
decision whether or not to receive funds indirectly.
Nonetheless, we noted that, where there is an absence of
privity, courts should be cautious in imposing Title VI. See

Our decision in Cureton precludes Smith's"controlling
authority" argument in the context of Title IX. Smith's
theory is identical to the one alleged and rejected in
Cureton. Like the Cureton plaintiffs, Smith alleges that the
NCAA exercised controlling authority over its federally-
funded member institutions because it had the power to
establish rules governing intercollegiate athletics at member
schools and made individual eligibility and waiver
decisions. Smith alleges nothing new with respect to the
NCAA's purported control over its members. Compare
Appellant's Br. at 19 ("[T]he NCAA has the power to
establish rules governing intercollegiate athletics at member
schools, including rules concerning eligibility . . . thus has
effective control over eligibility determination and is the
entity most responsible for discrimination that might enter
into such determinations."), with 

-
18 ("We emphasize that the NCAA members have not ceded
controlling authority to the NCAA by giving it the power to
enforce its eligibility rules directly against the students.").
Similar to the plaintiffs in Cureton, Smith is attacking an
eligibility rule that NCAA members may choose to enforce
or ignore. As such, Cureton directly controls.5 Accordingly,
_________________________________________________________________

5. We note that the United States District Court for the District Court of
New Jersey has interpreted Cureton in this manner. Specifically, in
Bowers v. NCAA, 

(D.N.J. 2000), the District Court
examined whether the NCAA is a recipient of federal funds, thereby
subjecting it to the restrictions of S 504 of the Rehabilitation Act. In
addition to several other theories, the plaintiff contended that the NCAA
is a recipient of federal funds because the NCAA's member institutions,
which receive federal funding, have ceded "controlling authority" over

                               8
Smith is precluded from amending her complaint to include
her "controlling authority" theory, as it is futile. See In re
Burlington Coat Factory Sec. Litig., 

, 1434 (3d
Cir. 1997) ("An amendment is futile if the complaint, as
amended, would not survive a motion to dismiss for failure
to state a claim upon which relief could be granted.").

The fact that Cureton concerned Title VI rather than Title
IX does nothing to alter its impact on the present case. As
the Supreme Court noted in Smith, the scope of Title VI is
defined in terms nearly identical to Title IX. 

n.3. Courts have consistently
applied the same legal analysis to construe Title VI and
Title IX. Therefore, our discussion of the controlling
authority theory in the context of Title VI is applicable to
Title IX claims.

Smith alleges that the Supreme Court's decision in
Brentwood Academy v. Tennessee Secondary School Athletic
Ass'n, 

(2001), demonstrates that our
rejection of the "controlling authority" theory in Cureton
was incorrect. In Brentwood, a private high school sued a
state interscholastic athletic association under 42 U.S.C.
S 1983, seeking to prevent the enforcement of a rule that
prohibited the use of undue influence in the recruitment of
student athletes. The association regulated interscholastic
athletic competition among public and private secondary
schools. The issue before the Court was whether the
enforcement of the association's rules constituted state
action. The Court answered in the affirmative based upon
_________________________________________________________________

intercollegiate athletics to the NCAA. Following our holding in Cureton,
the court rejected the plaintiff 's argument. The court stated:

       Bowers also argues that the NCAA is a recipient of federal funds
       because the NCAA's member institutions have "ceded controlling
       authority" over intercollegiate athletics to the NCAA and because
the
       NCAA's member institutions receive federal funds. The Third Circuit
       has explicitly rejected this argument as a basis for finding that
the
       NCAA is a recipient of federal financial assistance.

n.25 (emphasis added). We agree with the District Court of
New Jersey's interpretation of Cureton.

                               9
the "pervasive entwinement" of state school officials in the
association's structure. See 

The Court reasoned that "the nominally private character
of the association is overborne by the pervasive
entwinement of public institutions and public officials in its
composition and workings, and there is no substantial
reason to claim unfairness in applying constitutional
standards to it." 

In particular, the Court noted
that the association was largely an organization of schools,
84% of which were public. Under the association's bylaws,
each member school was represented by its principal
or a faculty member. These representatives selected
members of the governing legislative council and board of
control from eligible principals, assistant principals, and
superintendents. Moreover, the Court pointed out that
public school officials not only controlled, but
overwhelmingly performed, all but the purely ministerial
acts by which the association existed and functioned in
practical terms. As such, the entwinement of the public
schools and the association was pervasive. See 

33.

The Court also discussed and distinguished its earlier
decision in Tarkanian, where it had held that the NCAA was
not a state actor. It initially noted that in Tarkanian,
various factors supported a conclusion that the NCAA was
a state actor. For example, UNLV had some part in setting
the NCAA's rules. Additionally, the Supreme Court of
Nevada had determined that UNLV had delegated its
traditionally exclusive public authority over personnel to
the NCAA. See 

However, Tarkanian ultimately
held that the NCAA was not a state actor because its
policies were shaped by several hundred member
institutions, most of them having no connection with
Nevada, and exhibiting no color of Nevada law. See 

then pointed out that, contrary to the NCAA, the
state association before it was an organization whose
member schools are all within a single state. In light of this
difference, Tarkanian did not apply. See 

"dictum in Tarkanian pointed to a contrary result on facts
like ours . . . .").

                               10
According to Smith, Brentwood implies that Cureton
incorrectly interpreted Tarkanian to conclude that the
voluntary nature of the NCAA's relationship with its
members undermined its "controlling authority." In other
words, Brentwood holds that the voluntary nature of an
association, i.e., the fact that members are free to depart,
is not determinative of whether members are "entwined
with, or under the control of " the association. Thus, she
contends that Tarkanian's determination that the NCAA
was not a state actor turned primarily upon the fact that
NCAA members were not within a single state (Nevada),
rather than upon the voluntary nature of their relationship
with the NCAA. In support of this contention, she relies on
the following language:

       Since it was difficult to see the NCAA, not as a
       collective membership, but as a surrogate for the one
       State, we held the organization's connection with
       Nevada too insubstantial to ground a state action
       claim.

       But dictum in Tarkanian pointed to a contrary result
       on facts like ours, with an organization whose member
       public schools are all within a single State.

She also points to the Court's remarks that "it
avails the Association nothing to stress that the State
neither coerced nor encouraged the actions complained of "
and "[n]o school is forced to join." 

934. In light
of this language, she contends that Cureton's "broader
reading" of Tarkanian is no longer viable.

We disagree with Smith's contention that, in the wake of
Brentwood, our interpretation of Tarkanian is flawed.
Although the NCAA's "collective membership" of varying
states largely motivated the holding in Tarkanian, the Court
nonetheless expressly relied upon the NCAA members'
voluntary relationship with the NCAA. Indeed, after
explaining that the NCAA cannot be considered a state
actor because a vast number of states shape its policy, the
Tarkanian Court stated, "[s]tate action nonetheless might lie
if UNLV, by embracing the NCAA's rules, transformed them
into state rules and the NCAA into a state actor."

, 109 S.Ct. at 463 (emphasis

                               11
added). The Tarkanian Court then went on to explain that
this transformation did not occur because the "UNLV
retained the authority to withdraw from the NCAA and
establish its own standards." Thus, it concluded that
"[n]either UNLV's decision to adopt the NCAA's standards
nor its minor role in their formulation is a sufficient reason
for concluding that the NCAA was acting under color of
Nevada law when it promulgated standards governing
athlete recruitment, eligibility, and academic performance."

109 S.Ct. at 463-64.

Further, the Court explained that the NCAA's
investigation, enforcement proceedings, and consequent
recommendations did not constitute state action. The Court
noted that although

       it is true that a State may delegate authority to a
       private party and thereby make the party a state actor,
       . . . UNLV delegated no power to the NCAA to take
       specific action against any university employee. The
       commitment by UNLV to adhere to NCAA enforcement
       procedures was enforceable only by sanctions that the
       NCAA might impose on UNLV itself.

109 S.Ct. at 464. Finally, the Court rejected
Tarkanian's argument that the NCAA's "power is so great
that the UNLV had no practical alternative to compliance
with its demands." It stated: "The university's desire to
remain a powerhouse among the Nation's college basketball
teams is understandable, and nonmembership in the NCAA
obviously would thwart that goal. But that does not mean
that [alternatives] were nonexistent." 

n.19.

As the above language indicates, Tarkanian's discussion
of UNLV's influence on NCAA rulemaking is distinct from
its examination of whether UNLV ceded its authority to the
NCAA. Thus, Brentwood did not abandon Tarkanian's
discussion and holding regarding the NCAA's alleged
control over its members; rather, it simply distinguished
Tarkanian, pointing out that, in contrast to the state
association before it, the NCAA's policies were not shaped
by one state alone. Accordingly, Tarkanian is still intact and
Cureton's interpretation is sound.

                                12
Smith also contends that Brentwood suggests that a less
restrictive standard than "controlling authority" governs
Title IX liability. Specifically, she argues that the NCAA was
"pervasively entwined" in the operations of its members and
thus is subject to Title IX. We disagree. The Supreme Court
in Brentwood stated: "We have treated a nominally private
entity as a state actor when it is `entwined with
governmental policies' or when government is `entwined in
[its] management or control.' 

(citations
omitted). Similar to "pervasive entwinement,""controlling
authority" exists when a public entity receiving federal
dollars has delegated control to a private actor or is
"entwined in its management or control." Although the
"public entwinement" theory differs from the"controlling
authority" theory in that it focuses on whether a public
entity controls or manages a private entity, its requirement
of control is no less rigorous. Thus, we do not think the
standards substantially differ.

In addition, Smith contends that Cureton does not apply
to the present case because it is procedurally
distinguishable. Specifically, she argues that Cureton
examined the NCAA's controlling authority on appeal from
summary judgment. In contrast, Smith is appealing from
an order granting a motion to dismiss and denying a
motion for leave to amend her complaint. Therefore, she
contends that she should be permitted to conduct discovery
to determine whether her case is factually distinguishable
from Cureton. She concedes, however, that member
institutions currently retain the choice to risk sanctions or
withdraw from the NCAA if they do not want to abide by its
rules and regulations. See Appellant's Br. at 19. As we
explained in Cureton, although this option is unpalatable, it
is nonetheless an option. Moreover, Smith does not contest
that member institutions still "decide what applicants to
admit, what employees to hire, and what facilities to
acquire." These facts heavily influenced our decision in
Cureton. Therefore, the differences in procedural posture do
not require that Smith be allowed to conduct discovery.

                               13
B. The NCAA's Relationship with the NYSP

Smith also argues that the NCAA is subject to Title IX
because it receives federal financial assistance through the
NYSP and the Fund.6 The NCAA does not challenge this
assertion and instead suggests that we remand to the
District Court for discovery and resolution of "whether the
NCAA's relationship with the NYSP is sufficient to subject it
to Title IX coverage." We agree and hold that Smith's
allegations regarding the relationship between the NYSP,
the Fund, and the NCAA, if proven, would establish that
the NCAA is a recipient of federal funds within the meaning
of Title IX.

Under federal regulations, a "recipient" of federal
financial assistance is defined as,

       any public or private agency, institution or
       organization, or other entity, or any other person, to
       whom Federal financial assistance is extended directly
       or through another recipient and which operates an
       educational program or activity which receives or
       benefits from such assistance, including any subunit,
       successor, assignee, or transferee thereof.

34 C.F.R. S 106.2(h). Thus, an entity may receive federal
financial assistance indirectly and still be considered a
recipient for purposes of Title IX. See Grove City Coll. v.
Bell, 

, 563-70, 

, 1216-19
(1984). In Grove City College, the Court held that Grove City
College was an indirect recipient as a result of the federal
grant money that students used to pay their tuition bills.
The Court reasoned that Congress ultimately intended
colleges and universities to receive the grant money at
issue, even if it was transferred through students. See 

Department of Transportation v. Paralyzed
Veterans of America, 

, 

(1986),
_________________________________________________________________

6. It is important to note that if the NCAA is a federal funding recipient
based on the NYSP's receipt of federal dollars, then all of the NCAA's
programs fall under Title IX's proscriptions, including its implementation
of the Postbaccalaureate Bylaw, which is at issue in this case. See 20
U.S.C. S 1687 (Civil Rights Restoration Act of 1997) (amending Title IX to
define "program or activity" to include institution wide coverage).

                               14
the Court drew the distinction between entities that
indirectly benefit from federal financial assistance and
those that indirectly receive assistance. It held that S 504 of
the Rehabilitation Act of 1973 does not apply to commercial
airlines by virtue of financial assistance the government
provides to airports.7 The Court concluded that S 504
covers those who receive the aid, but not those who merely
have a beneficial relationship with entities receiving such
assistance. The Court's decision relied upon Congress'
power to enact the Rehabilitation Act pursuant to the
Spending Clause of the Constitution. The Court stated that:
"Congress limited the scope of S 504 coverage as a form of
contractual cost of the recipient's agreement to accept the
federal funds." 

106 S.Ct. at 2711. It concluded
that commercial airlines, although beneficiaries of the
funding, were not "recipients" of the assistance because
only the airport operators were "in a position to accept or
reject their obligations as a part of the decision whether or
not to `receive' federal funds." 

106 S.Ct. at 2711.
As such, the intent of the grant-maker is not the only
relevant consideration regarding whether an entity is an
indirect recipient of federal financial assistance. Courts
should also consider the degree to which the entity is able
to control decisions made with respect to the money, the
most important decision being whether the grant money
should be accepted at all.

Here, Smith alleges that the NCAA indirectly received
federal financial assistance by virtue of its relationship with
the NYSP and the Fund. According to Smith, the NCAA
effectively controlled the NYSP and the Fund. Specifically,
she alleges inter alia, that: 1) the NYSP Committee was an
NCAA committee responsible for the administration of the
NYSP; 2) the Council of the NCAA, the entity that directed
the general policy of the NCAA during certain periods,
limited the powers of the Fund's Board of Directors; 3) the
Executive Director of the NCAA and the chairperson of the
NYSP Committee were ex officio members of the Fund's
Board of Directors; 4) all of the members of the Fund's
_________________________________________________________________

7. Section 504 prohibits discrimination based on disability in
substantially the same terms that Title IX uses to prohibit gender
discrimination.

                               15
Board were either employees of the NCAA or members of
the NCAA's NYSP Committee; 5) the Fund had to report to
the Council of the NCAA on an annual basis; 6) upon
dissolution of the Fund, its assets will be distributed
exclusively to the NCAA; and 7) the NCAA's Executive
Director remarked that the NYSP is "one of the NCAA's best
kept secrets." Appellant's Br. at 13-14 (citing Bowers v.
NCAA, 

, 493-94 (D.N.J. 1998)).

In our view, these allegations, if proven, are sufficient to
bring the NCAA under the purview of Title IX. Although we
are hesitant to impose Title IX obligations on an entity that
is not a direct recipient of federal financial assistance, we
have nonetheless noted that "those who truly assume
control of federally-funded programs are in a position to
accept or reject that control as part of a decision whether
or not to receive the federal funds indirectly." See 

. We believe that Smith's allegations
establish that the NCAA "truly assum[ed] control" of the
NYSP and its Fund. Smith's allegations render the NCAA,
the NYSP, and the Fund virtually indistinct. In light of this
alleged control, the NCAA did more than "indirectly benefit"
from federal assistance like the commercial airlines in
Paralyzed Veterans; rather, through the NYSP and its
Fund, it was in a "position to decide whether to`receive'
federal funds and thereby accept the concomitant
obligations of [Title IX]." Paralyzed 

; 106 S.Ct. at 2711.

Several district courts have arrived at this same
conclusion.8 First, in Cureton v. NCAA, No. Civ. A. 97-131,

(E.D. Pa. Oct. 9, 1997), the United States
District Court for the Eastern District of Pennsylvania
examined the NYSP relationship theory in the context of the
NCAA's motion for summary judgment against student
athletes who alleged violations under Title VI. The court
held that "if the National Youth Sports Program Fund is
nothing more than a sham to disguise the NCAA's use of
_________________________________________________________________

8. Additionally, the Department of Health and Human Services has
issued two letter determinations that the NCAA is a recipient of federal
assistance by virtue of the Department's grant to the NYSP Fund. See
Appellant's Br. at 14 n.2.

                                16
federal funds for its own benefit, then the NCAA does
receive federal financial assistance." 

However,
based on the record before it, the court was unable to make
a determination. As such, it denied the motion and held
that, at trial, the plaintiffs had to prove that the NCAA
received federal financial assistance.

Similarly, in Bowers v. NCAA, 

(D.N.J.
1998), the United States District Court for the District of
New Jersey dismissed the NCAA's motion for summary
judgment in a suit claiming discrimination underS 504 of
the Rehabilitation Act. Bowers made extensive findings to
support its conclusion that there was a genuine issue of
material fact regarding "whether the NCAA receives federal
funds through the [Fund] or whether the NCAA is
intertwined with the [Fund] such that it cannot be
considered separate." 

Smith's allegations mirror
these findings.

The District Court revisited the issue two years later. See
Bowers v. NCAA, 

(D.N.J. 2000). The
court found that "there is evidence that the NCAA may be
in control of the NYSP and the federal funds the NYSP
receives." 

In particular, it noted that the NYSP
was established in 1969 and was run exclusively by the
NCAA until 1989, when a not-for-profit corporation, the
Fund, was created to administer the NYSP. According to a
member of the NYSP's Board of Directors, the Fund was
established because the NCAA wanted to ensure that it was
not a recipient of federal grant dollars or a contractor with
the federal government. The court explained that, despite
the creation of the Fund, the NCAA's role in relation to the
NYSP essentially remained the same. For example, it
administers the Fund for a fee of one dollar per year. The
Fund has no employees and its business address is the
same as the NCAA's. Moreover, the court stated that the
NCAA "seems to have the ability to influence significantly
how the NYSP's federal funding is spent[ ]" given the
involvement of the NCAA with the Fund's Board of
Directors. 

In spite of some evidence to the
contrary, the court held that there was a genuine issue of
material fact as to whether the NCAA was a recipient of
federal financial assistance. The court concluded,"[t]o

                               17
ignore this evidence and hold that the NCAA does not
exercise control over the [Fund's] federal funding would be
to elevate form over substance in a way that should not be
countenanced." 

We agree with the District Courts of Pennsylvania and
New Jersey. Amending Smth's complaint to include an
allegation that the NCAA is a federal funding recipient by
virtue of its relationship with the NYSP and the Fund would
allow it to survive a motion to dismiss and thus would not
be futile. See 

(citations omitted)
(explaining that a district court justifiably may deny leave
to amend on grounds such as undue delay, bad faith,
dilatory motive, and prejudice, as well as on the ground
that an amendment would be futile). In other words,
Smith's complaint, as amended, would survive a motion to
dismiss for failure to state a claim upon which relief can be
granted. See 

(citations omitted) (explaining that
an amendment is futile if the complaint, as amended,
would not survive a motion for failure to state a claim upon
which relief could be granted). As such, we will remand to
the District Court to allow Smith to amend her complaint to
include the NYSP relationship theory. The District Court
should conduct discovery and make findings with respect to
this allegation.9

III. CONCLUSION

For the foregoing reasons, we will reverse the District
Court's denial of Smith's motion to amend her complaint
with respect to her Title IX claim. In light of this
conclusion, we will remand to the District Court for further
proceedings consistent with this opinion.
_________________________________________________________________

9. We emphasize that we make no findings of fact. Rather, we simply
hold that Smith presents a viable theory for subjecting the NCAA to Title
IX's requirements and thus her proposed amendment would not be
futile. We hold no opinion as to whether Smith's allegations are true or
whether the NCAA ultimately controlled the NYSP and the Fund. These
are questions for the District Court to determine.


                               18
McKEE, Circuit Judge, concurring:

I join part II B -- The NCAA's Relationship with the NYSP
-- fully, and without reservation. However, I concur with
the discussion in part II A -- Controlling Authority Theory
only because I agree that we are bound by the panel's
decision in Cureton v. National Collegiate Athletic
Association, 

(1999, 3rd Cir) (McKee, J.
dissenting). See I.O.P. 9.1 ("no subsequent panel overrules
the holding in a published opinion of a previous panel.").

Inasmuch as I have previously noted why I believe that
the decision in NCAA v. Tarkanian, 

(1988)
supports the argument that there are material issues of fact
as to whether the NCAA can be subject to Title IX under the
Controlling Authority Theory, I will not reiterate my position
here in detail. Rather, I rely upon the lengthy discussion of
Tarkanian that I set forth in my dissenting opinion in
Cureton. See 

.

There, I noted that the Supreme Court's conclusion that
the relationship between the NCAA and the University of
Nevada at Las Vegas ("UNLV") established only that UNLV
was not a state actor. The Court left open the issue before
us; whether that relationship is such as to allow the
plaintiffs to succeed under a "controlling authority" theory
of recovery. Nothing in my colleagues' discussion of the
issues sub judice convinces me that my reading of
Tarkanian is erroneous insofar as it relates to"controlling
authority" liability under Title IX. In fact, it only reinforces
my belief that we incorrectly decided Cureton.

The majority relies upon the fact that " `UNLV's options
[in Tarkanian] were unpalatable does not mean that they
were nonexistent.' " Maj. op. at 7 (quoting 

n. 19). However, the Court's pronouncement
must be read in context with the state action analysis it
was undertaking. It does not control our inquiry into
whether the NCAA is a "controlling authority." I am not
nearly as impressed as the majority that the Court in
Tarkanian, held that UNLV was not a state actor because it
had unpalatable choices. Consider a scenario where A can
impose such unpalatable consequences upon B that B has
no choice but to submit to A's will. A is controlling B. That

                               19
practical reality is not altered by the theoretical possibility
that B can defy A at A's peril and pay dearly for the act of
defiance. In fact, this is precisely how power and control
are exercised and manifested. Other than direct
administrative or legal control, I can think of no better way
for one entity to control another than by making the cost of
defiance so high that the controlled entity's only realistic
alternative is submission. The NCAA clearly imposed its will
on UNLV in Tarkanian and forced the university to do
something that was against the will of the university's top
administrators, and which they thought was unfair.
Accordingly, Tarkanian does not support denying the
plaintiff 's "controlling authority" theory as a matter of law.
However, our holding in Cureton does. Therefore, I must
concur in the majority's opinion.

A True Copy:
Teste:

       Clerk of the United States Court of Appeals
       for the Third Circuit

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